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Opt-Out and Direct Action Lawsuits Round-Up

September 12, 2017

Opt-out litigation is an important aspect of securities litigation. For some investors, class action litigation is not always the best route for recovering losses. In an opt-out lawsuit, or direct litigation, the investor or small group of investors “opts out” of a class action and pursues its own claim in a separate lawsuit.

Benefits of opt-out lawsuits typically include greater control over case decisions, the ability to name additional defendants, a potentially greater recovery than class actions, and other advantages. Considerations can include complexities with filing deadlines and other procedural details, especially when it comes to international cases that may be subject to non-U.S. rules. These require in-depth knowledge of the rules for each specific region.

The following are some important litigation developments arising in the U.S. and globally: 

Mastercard Lawsuit May Be First to Test Britain’s Consumer Rights Act

An $18 billion class action lawsuit against MasterCard was recently blocked by a British court. The claim alleged that due to MasterCard’s interchange fee system, consumers were forced to pay businesses higher prices over a 16-year period, which may be a breach of European Union competition law. 

The tribunal ruled that the case could not move forward as a collective action, stating that there was no way to ensure individuals would receive compensation for any loss suffered (even if losses could be estimated across the whole class). 

The planned lawsuit had been considered “the perfect exam question” for Britain’s Competition Appeal Tribunal (CAT), which had been set up in 2015 to oversee future opt-out class action antitrust lawsuits.

The case is currently being revived through an appeal, just weeks after the tribunal refused to certify the claim. If allowed to proceed, the case will be the largest and most complex in British legal history, and will test the limits of the country’s new Consumer Rights Act, which introduced U.S.-style opt-out class actions for violations of competition law. Thus, the MasterCard case could open the door to future opt-out cases in the Britain and Europe as a whole.

Follow-Up on Wells Fargo Class Action Lawsuit

New information regarding the Wells Fargo fake accounts class action lawsuit indicates that Wells Fargo employees may have opened significantly more unauthorized accounts than previously calculated. This information could put the current $142 million settlement with customers in jeopardy.

An external review of the bogus accounts now will cover January 2009 until September 2016. This is nearly twice as long as the initial examination of the accounts, bringing the total amount of possibly bogus accounts to 3.5 million, which is 67 percent more than the original estimate. 

U.S. District Judge Vince Chhabria will  potentially examine the number of account holders who plan to opt out of the settlement in pursuit of separate, direct litigation against Wells Fargo in January 2018. The additional information from the investigations may have weighty effects on the number of opt-outs from the class action. 

This case illustrates the complexity involved in large-scale consumer class actions, as well as the way that opt-out actions interact with fact-finding and settlement processes. 

Syngenta Litigation

A class action lawsuit against Syngenta is proceeding three years after China began rejecting corn imports from the U.S. The suit alleges that Syngenta created billions of dollars in losses for corn farmers after it began selling a genetically modified version of corn seed, resulting in China’s ban on U.S. corn imports. 

Corn farmers were urged to opt-out of the lawsuit based on the assertion that not every farmer operates the same and may require special considerations for recovery. While opting out of a lawsuit can often expose individual farmers to additional discovery and deposition requirements, there is also the possibility that opting out may result in greater returns for farmer plaintiffs. The ability to opt out may also allow plaintiffs to address more specific issues in court.  

Open Class Lawsuit Against Australia’s Commonwealth Bank

An open class action lawsuit against Australia’s Commonwealth Bank (CBA) will be backed by litigation funder IMF Bentham. The lawsuit alleges that the lender failed to keep shareholders up to date, while at the same time making “misleading and deceptive” statements regarding compliance with anti-money laundering laws.

The lawsuits could potentially be Australia’s largest shareholder lawsuit, and could cost CBA more than $200 million. The lawsuit will be filed on an “open basis” — meaning that all affected shareholders in the class will be automatically included unless they affirmatively opt out. 

Australian open class lawsuits tend to differ from U.S. opt-out lawsuits in that the claims registration process to opt out can sometimes take place before any settlement or judgement is even reached. Deadlines to register for an opt-out claim can often be short in Australia, so timely action is needed. 

Summary

The decision to opt out and pursue a direct action is complex, and requires an understanding of the specific type of misconduct involved, as well as local jurisdictional filing rules and limitations. A direct lawsuit can often provide plaintiffs with greater control over the course of their legal recovery. Extensive knowledge of the law and the specific industry is needed for success in opt-out lawsuits. 

If you have any questions or concerns regarding opt-out lawsuits, contact us today at Kessler Topaz. Our team of attorneys has extensive experience in direct actions and opt-out lawsuits for major disputes, such as opt-out securities fraud action in connection with Petrobas and the related Brazil corruption scandals.